Walker: The true state of the state

Published 2:40 pm, Friday, February 14, 2014

As a former comptroller general of the United States and head of the U.S. Government Accountability Office (GAO), I have seen many State of the Union addresses and a number of State of the State addresses in person, including this year's address by Gov. Dannel P. Malloy. Over the years, I have become increasingly concerned with the failure of these addresses to provide a full and fair view of the true state of our nation and the respective state, irrespective of which person or political party is in power.

Our nation has a number of serious cultural challenges. We have too many people living for today and not enough focused on creating a better tomorrow. This is caused by the widespread existence of three maladies: myopia (i.e., shortsightedness), tunnel vision and self-interest. These maladies have reached epidemic proportions in government and they are typically on wide display during the various State of the Union and State of the State addresses.

As a CPA, I have been particularly concerned with the propensity of politicians to distort the facts in an attempt to deceive the people about the true financial condition and fiscal outlook of the nation and various states. Such was clearly the case again this year in both Washington and Hartford.

President Barack Obama touted the fact that the federal deficit has dropped dramatically over several years to $680 billion in fiscal 2013. And yet he did not mention that we have over $70 trillion in liabilities and unfunded promises that grow daily. He also failed to note that no meaningful progress has been made to address the drivers of our nation's structural deficits. These represent a real threat to our collective future and are attributable to huge unfunded social insurance obligations, health-care costs, and an outdated and uncompetitive tax system.

Malloy celebrated an alleged surplus of about $500 million. I use the word "alleged" because it is largely a contrived illusion. The claimed surplus is due primarily to temporary factors, selected gimmicks, and various creative accounting practices. For example, most of the revenue increase is attributable to a temporary extension of taxes that were supposed to expire, a surge in revenue due to the dramatic rise in the equity market in 2013, and a new, and presumably long-term, gas tax increase. The state deferred or refinanced scheduled bond payments, including accrued interest, and used bond premiums and borrowed additional funds for operating purposes. And believe it or not, our state treated certain bond proceeds as revenue for budget purposes. The "bottom line" is the alleged surplus is manufactured with additional taxes and more debt.

The governor also conveniently failed to mention in his address that, based on reasonable assumptions, we are expected to have a budget deficit of at least $1 billion in the next biennial budget period (2016-2017) and that Connecticut has the highest liabilities and unfunded obligations per taxpayer of any state in the union. These are facts and they represent a real threat to our collective future.

Despite the above, we heard Malloy propose a number of election-year giveaways in an attempt to curry favor and buy votes. For example, he has proposed a one-time $55 per taxpayer credit when he permanently raised taxes by an average of hundreds of dollars a year per taxpayer early in his tenure.

In addition, Malloy proposed to exempt half of teachers' pension payments, and not other government workers, from the state income tax. Interestingly, the governor's support among teachers has declined significantly during his tenure. Both of these proposals represent political pandering and are inappropriate given the current and projected financial condition of the state.

It is time for more truth and transparency regarding the true state of our state. Connecticut ranks at or near the bottom of all 50 states in connection with a range of key economic, financial and competitiveness statistics. We are rapidly approaching a tipping point and a major course correction is in order.

While it is understandable and appropriate for President Obama, Governor Malloy, and other politicians to note progress when it has occurred, in the case of our nation and Connecticut that progress needs to be coupled with the serious challenges that remain. Our political leaders need to tell us the whole truth and issue a call to action in connection with the key challenges that remain. They should also outline a possible way forward to addressing them. That is what true leadership is all about.

Americans and the citizens of Connecticut need and deserve to be addressed in a serious and substantive fashion. We know that we are in trouble and are starved for truth, leadership and solutions. It is time for our elected leaders to provide this to us.

David M. Walker, of Bridgeport, is a former U.S. Comptroller General. He has formed an exploratory committee as he considers running for Connecticiut lieutenant governor.